Uncharted Territory - Answers to some of the most common questions
Let me begin with my heartfelt hope that this finds you and your loved ones in good health. I wanted to reach out with some words of reassurance. In short…I’m here. We are in uncharted territory, and the mortgage marketplace is continually shifting to keep pace with economic realities and the needs of Canadian homeowners. Several announcements have been released in quick succession: by the government, lenders, and mortgage insurers. Here is a quick summary of some of the most common questions to help you make sense of it all. I encourage you to give me a call at any time if you have questions about your own situation.
Q Mortgage payment deferrals have been announced. What does it mean and how do I access that?
A Mortgage insurers – Canada Mortgage and Housing Corp (CMHC), Genworth, and Canada Guaranty – have joined with lenders to announce that eligible clients can delay mortgage payments. These are “compassionate” programs for homeowners who are in serious financial straits and are unable to make their mortgage payments for a period of time. You will need to apply to the program, and assistance will be determined on a case-by-case basis – so please do not just start skipping payments. If you urgently need this kind of help, get in touch, and I can help you find the right channels to apply. Lenders have been swamped with calls, so you may need some patience to get through this process. But we can also talk about financing options that might help you at this time.
Q The Bank of Canada has lowered interest rates a few times. Won’t that help me with my variable mortgage or line of credit?
A Yes, any lowering of the Bank of Canada rate will likely mean that your interest rate will also drop. Keep in mind that it usually doesn’t happen instantly, and your own rate won’t necessarily move in lock-step with the Bank of Canada rate. Ultimately, it’s the lender’s decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in mortgage defaults.
Q So if the rates have dropped so low, should I lock in my variable mortgage? Or trade for a low fixed rate?
A I can go over the pros and cons with you. There is no simple answer.
Q What about my fixed-rate mortgage?
A If you’ve got a fixed-rate mortgage, then nothing changes for you right now. The rate you negotiated is guaranteed for the entire term of your mortgage. However, if your fixed rate is a lot higher than the current rates available, then it is still worth calling to see if it makes sense to re-negotiate your mortgage to take advantage of today’s rates. I can do a cost/benefit analysis to see if the switch can save you money.
Q I have some credit-card and/or loan debt that now has me worried.
A If you’re carrying high-interest credit card debt, and you have more than 20% equity in your home, it can make sense to roll those other debts into a new mortgage. You get one manageable payment, better cash flow, and interest savings.
We are all navigating turbulent waters and many things are changing. The most important advice I can give you is to get in touch early if you’re anticipating any challenges. Right now we all need to take things as calmly as we can, evaluate our priorities, and make decisions that are needed for the long term.